INCOME TAX ACT, 1961

Section 14A Rule 8D(iii)

Disallowance under section 14A - Expenditure against exempt income - Validity off validity of -

Assessee was a bank. AO was of the opinion that provisions of section 14A read with rule 8D were applicable to assessee, as it was keeping common and consolidated accounts for income earning activities. AO alleged that assessee was having common infrastructure and common personnel for earning income under various heads. Thus, assessee was using its administrative, managerial and infrastructural setup for earning income, which does not form part of total income under the Act. AO thus rejected claim of assessee regarding expenditure in relation to income which did not form part of total income, and made substantial addition.Held: Investments made by a banking concern are part of the business or banking. Therefore, the income arising from such investment is attributable to business of banking falling under the head 'profits and gains of business and profession'. Instant assessee was also a Bank, where shares were held as stock-in-trade and therefore, it became business activity of assessee. Thus, such investments were not the investments made by assessee in order to fall within the ambit of rule 8D (iii).

Followed: Maxopp Investment Ltd. v. CIT, New Delhi and Pr. CIT-I v. Corp Ltd. (2018) 402 ITR 640 (SC) : 2018 TaxPub(DT) 1403 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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